Commodity Money

Abstract

Commodity money is a medium of exchange that may be transformed into a commodity, useful in production or consumption. Although commodity money is a thing of the past, it was the predominant medium of exchange for more than two millennia. Operating under a commodity money standard limits the scope for monetary policy, actions that alter the value of money. However, it does not eliminate monetary policy entirely. The value of money can be altered by changing the commodity content or legal tender quality of monetary objects, or by restricting the conversion of commodities into money or vice versa.